Economics Chapter 16: The Federal Reserve and Monetary Policy – Flashcards
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central bank
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a nation's main monetary authority
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monetary
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means "relating to money"
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Federal Reserve System
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is the central bank of the US
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currency
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coins and paper money
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Board of Governors
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supervises the operation of the Fed
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Federal Open Market Committee (FOMC)
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supervises the sales and purchase of government securities
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thrift institution
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a financial institution that serves savers
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check clearing
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a service offered by the Fed to recored receipts and expenditures of bank clients
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bank holding company
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owns, or has a controlling interest in, more than one bank
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bank exam
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an audit of the bank's financial practices
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required reserve ratio (RRR)
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the fraction of a bank's deposits that it must keep in reserve
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deposit multiplier formula
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tells how much the money supply will increase after an initial cash deposit
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monetary policy
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includes the Fed's actions that change the money supply in order to influence the economy
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open market operations
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are the sales and purchase of federal government securities
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federal funds rate (FFR)
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the interest rate that banks charge one another to borrow money
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discount rate
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the interest rate that the Fed charges when it lends money to other banks
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prime rate
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the interest rate that banks charge their best customers
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expansionary monetary policy
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a plan to increase the money supply
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contractionary monetary policy
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a plan to reduce the money supply
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easy-money policy
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another name for expansionary monetary policy
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tight-money policy
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another name for contractionary monetary policy
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wage and price controls
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government limits or increases in wage in prices
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3 duties of a central bank
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holding reserves assuring stability lending money
